Multi‐attribute classification method for spare

parts inventory management

Author(s):
Marcello Braglia (Dipartimento di Ingegneria Meccanica, Nucleare e della Produzione,
Università di Pisa, Pisa, Italy)
...Show all authors

Abstract:

Inventory constraints, costs of lost production, safety and environmental objectives, strategies of
maintenance adopted, logistics aspects of spare parts are some of the criteria taken into account,
and spare parts classification is thus defined with respect to multiple attributes. In virtue of the
large number of the potential operational characteristics to be considered, the decision diagram is
integrated with a set of analytic hierarchy process models used to solve the various multi‐attribute
decision sub‐problems at the different levels/nodes of the decision tree. An inventory policy
matrix is defined to link the different classes of spare parts with the possible inventory
management policies so as to identify the “best” control strategy for the spare stocks. The
principles of the theory and an actual application in a company operating in the paper industry are
reported in the paper.
Keywords:
Inventory control, Analytical hierarchy process
Type:
Research paper
Publisher:
Emerald Group Publishing Limited
Copyright:
© Emerald Group Publishing Limited 2004
Published by Emerald Group Publishing Limited
Citation:
Marcello Braglia, Andrea Grassi, Roberto Montanari, (2004) "Multi‐attribute classification
method for spare parts inventory management", Journal of Quality in Maintenance Engineering,
Vol. 10 Issue: 1, pp.55-65, https://doi.org/10.1108/13552510410526875
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The inventory management system for automobile spare parts in a
central warehouse

Abstract
Because of the complex structure of spare parts supply chain, the conventional approaches, which do
not consider the relationships between decision factors globally, cannot achieve the optimal
performance. Therefore, this paper aims to develop an enhanced fuzzy neural network (EFNN) based
decision support system for managing automobile spares inventory in a central warehouse. In this
system, the EFNN is utilized for forecasting the demand for spare parts.
However, without considering relevant domain knowledge, traditional neural networks are found to be
suffered from the problem of low accuracy of forecasting unseen examples. Therefore, in our EFNN,
the following improvement is made: First, it assigns connection weights based on the fuzzy analytic
hierarchy process (AHP) method without painstakingly turning them. Second, by generating and
refining activation functions according to genetic

algorithm, our EFNN can provide comprehensive and accurate activation functions and fit a wider
range of nonlinear models. Last, but not least, an adaptive input variable is introduced to decrease the
impact of the bullwhip effect on the forecasting accuracy.
The proposed system is evaluated with the real word data and experimental results indicate that our
EFNN outperforms other five models in fill rate and stock cost measures.

Integrating Closed-Loop Supply Chains and Spare-Parts

Management at IBM

Abstract
IBM is among the pioneers recognizing the benefits of closed-loop supply chains that integrate product
returns into business operations. We worked on a project exploiting product returns as a source of spare
parts. Key decisions concern what recovery opportunities to use, the channel design, and coordinating
alternative supply sources. Our analytic inventory-control model and a simulation model showed that
procurement-cost savings largely outweigh reverse logistics costs and that information management is
essential. These findings provide a basis for significantly expanding the usage of the novel parts supply
source, thereby cutting procurement costs.
Service differentiation in spare parts inventory
management
A A Kranenburg & G J van Houtum

Abstract

The contemporary after-sales market is of increasing importance. One of the features required by the
market is to provide differentiated service levels to different groups of customers. We use critical levels
as a means to offer differentiation. Critical level policies aim to exploit the differences in target service
levels by inventory rationing. In our multi-item single-location spare parts inventory model, we aim to
minimize the spare parts provisioning cost, that is inventory holding and transportation cost, under the
condition that aggregate mean waiting time constraints for all customer groups are met. In a
computational experiment and a case study with data from a company in the semiconductor supplier
industry, we show that significant cost reductions can be obtained when critical level policies are used
instead of base stock policies (ie policies without critical levels).
Keywords: inventory, heuristics, cost benefit, optimization, integer programming, queueing

Spare parts inventory management

Abstract
A method for managing spare parts and tools for a manufacturing enterprise is disclosed. Historical
demand values are statistically analyzed to determine optimal stocking levels for spare parts based
upon required availability percentages, parts lead times, and the statistical distribution parts demand
levels. Parts stocking decisions can also be based upon planned and preventative maintenance
timeframes with such parts ordered on an as-needed basis in accordance with lead times. Spare parts
inventory management can utilize an enterprise-wide computer system to integrate parts demand
planning with systems used for engineering and other changes to manufacturing processes and facility
maintenance systems. The computer system can perform varying degrees of the parts reordering and
planning process and automate certain steps while providing for decision of other issues by parts
management personnel.
Description
BACKGROUND OF THE INVENTION
For as long as manufacturing processes have existed, there has been a need for spare and replacement
parts. Modern manufacturing processes may comprise thousands of discrete parts and subassemblies,
each of which will eventually require repair or replacement depending upon a myriad of factors such as
the intensity of use and environmental considerations. Process maintenance is crucial to profitability for
manufacturing enterprises, and entails scheduling for maintenance and repairs, and providing that
adequate parts and tools will be available to carry out such repairs in an expeditious fashion.
Additionally, sufficient parts must be available for unplanned parts replacements.
Modern manufacturing enterprises utilize many processes operating at facilities scattered across the
globe. Furthermore, the aggregate value of spare parts purchased and held in inventory to support such
enterprises can reach into the hundreds of millions of dollars. Mismanagement of spare parts inventory
carries two great risks: if spare part stocks are inadequate, then the manufacturing processes cannot
operate at full profit potential; on the other hand, excess inventory of unneeded spare parts represents a
misapplication of capital that could be otherwise used in a more effective manner.
Despite the pressures for effective inventory management, some manufacturing facilities which are part
of a multi-facility enterprise still manage spare parts independently of one another. This is due to a
number of factors, including the fact that oftentimes facilities will use differing processes that identify
the same parts under differing designations. Other enterprises may utilize a central repository of spare
parts that are distributed to facilities which keep their own stock of certain parts, but part levels are
managed based upon set stocking requirements, without consideration of actual parts demand,
availability of parts outside the central store, the dynamic nature of parts requirements, or capital
investment implications. Accordingly, there is a need for an integrated parts management system to
more accurately determine spare parts ordering and distribution needs for multi-facility enterprises that
takes such factors into account.
One measure of the effectiveness of spare parts management is referred to as the “turns ratio,” which is
found by taking the usage of spare parts inventory over a given time period and dividing by the
inventory stock level for that period. A higher turns ratio results from an increase in the amount of parts
usage relative to parts kept in stock, and is indicative of more effective parts management than a lower
turns ratio. For typical large-scale manufacturing enterprises, the turns ratio for spare parts inventory is
around 1 or lower. Enterprises have increased turns ratios for sales inventory management, but have not
achieved consummate increases in the turns ratio for management of internal inventories for spare parts
and the like.
Manufacturing enterprises can use enterprise resource planning and accounting systems such as SAP®
to track manufacturing asset history and costs. Additional computer systems may be used in the design
and revision of manufacturing processes. However, these existing systems are not optimized for spare
parts management.
SUMMARY OF THE INVENTION
A method for managing enterprise-wide component inventory can include the steps of identifying a
plurality of components, each of which is either a spare part or tool used in support of a manufacturing
process; maintaining at least one inventory store of the components, which can include both central hub
and facility-based parts storage; calculating an enterprise-wide demand plan for each of the
components; and adjusting the number of the component maintained in the inventory store based upon
the demand plan. The adjustment can include issuing or changing purchase orders for spare parts,
transferring spare parts between facilities, or selling excess spare parts.
Calculating the demand plan can take into account changes made in process parts requirements by
engineering personnel, such as the addition or deletion of parts or entire processes. When use of a part
is discontinued, the demand plan can be calculated to run out existing inventory stocks to the fullest
degree possible, and when a new part is added, the plan can include consideration of lead times to
ensure spare parts are available when the new part comes on-line. The method can also account for
parts changes due to other factors such as original equipment manager (OEM) changes.
The demand plan can be calculated based upon statistically-derived safety stock considerations based
upon historical demand patterns so that sufficient stores of parts are maintained to satisfy breakdown
demand for parts during lead time for reordering the parts in accordance with a specified parts
availability requirement. The demand plan can provide for non-breakdown demand satisfaction through
parts ordering in accordance with planned or preventative maintenance determinations for parts
replacements. The demand values can be identified using data associated with an enterprise resource
planning computer system.
Historical usage of components can be tracked, including tracking data regarding individual
components such as repair history and location. The parts can be tracked using barcodes, RFID chips,
or other identification indicia.
A method for managing enterprise-wide component inventory may include monitoring at least one
identification device associated with a component, the component comprising a spare part or tool used
in support of a manufacturing process, determining a physical location of the component in response to
the monitoring, and adjusting inventory data for the component based upon the location of the
component.
The step of monitoring can include scanning an RFID tag associated with a component that is in use in
a manufacturing process or components in storage.
A method for managing enterprise-wide component inventory may also include identifying a plurality
of components, each comprising a part or tool used in support of at least one manufacturing process,
maintaining warranty data for each component, evaluating component status based component data,
including the history of the component and the warranty data, providing for repair in accordance with
the warranty data for each component if warranty coverage is available. The step of providing for repair
can include generating repair request and shipping documents for the component to a repair service
provider when warranty coverage is available.
BRIEF DESCRIPTION OF THE DRAWINGS
A full and enabling disclosure of the present invention, including the best mode thereof, directed to one
of ordinary skill in the art, is set forth more particularly in the remainder of the specification, which
makes reference to the appended figures, in which:
FIG. 1. illustrates a representative arrangement of manufacturing facilities operated in accordance with
the spare parts management system and methodologies disclosed herein;
FIG. 2. represents an exemplary flow diagram for managing spare parts inventory in one embodiment
of the management system; and
FIG. 3. represents an exemplary flow diagram of the steps for proactive parts demand management in
accordance with another aspect of a spare parts inventory management system as disclosed herein.
Repeat use of reference characters in the present specification and drawings is intended to represent
same or analogous features or elements of the invention.
DETAILED DESCRIPTION OF THE INVENTION
Reference will now be made in detail to present embodiments of a spare parts inventory management
system, one or more examples of which are illustrated in the accompanying drawings, with like
numerals representing substantially identical structural elements. Each example is provided by way of
explanation, and not as a limitation. In fact, it will be apparent to those skilled in the art that
modifications and variations can be made without departing from the scope or spirit of the disclosure
and claims. For instance, features illustrated or described as part of one embodiment may be used on
another embodiment to yield a still further embodiment. Thus, it is intended that the spare parts
inventory management system disclosed herein includes modifications and variations as come within
the scope of the appended claims and their equivalents.
Manufacturing Facility Topology
FIG. 1 illustrates an exemplary arrangement of facilities 10, 12, 14, and 16. Each facility may comprise
one or multiple buildings in which manufacturing processes A, B, and C, or parts thereof, are carried
out. The illustrated facilities are for example only; the methods of the present subject matter may be
practiced with more or fewer facilities than are illustrated in FIG. 1. Each facility may house a number
of the same, or different, manufacturing processes. In one embodiment, as illustrated in FIG. 1 at
facility 10, the enterprise maintains one or more parts warehouses where no manufacturing processes
are actually operated. The parts warehouses may be utilized as central stores to provide parts to a
number of facilities in a single- or multi-tier hub and spoke arrangement. Alternatively, facilities with
active manufacturing processes can serve as hubs, with other manufacturing process facilities serving
as spokes. The facilities may be physically located any distance from one another, and are linked to an
enterprise-wide computer network 19. Parts and materials transport network 18 provides transportation
and logistical support via truck, rail, air, and other transportation means.
Each facility has associated with it a spare parts inventory store or stores, shown by the dotted lines,
which represent stocks of spare parts maintained at the facilities. As illustrated in FIG. 1, two
exemplary spare parts types 20 and 20′ are shown for ease of explanation. Although FIG. 1 depicts only
two spare parts types, a spare parts inventory management system as disclosed herein can be used with
any number of parts, including the multiple thousands of spare parts that are commonly needed in
modern manufacturing processes. Additionally, as used herein, the term “spare parts” includes any
other components used in support of manufacturing processes exclusive of the product or materials
produced or operated upon by the manufacturing processes. Such components can include new and
used spare parts, tools, tool kits, or process subassemblies. The number of each spare part type that is
kept in inventory may vary from zero on up.
A record of spare parts inventory on hand for each facility is maintained using a computer database or
other data compilation, accessed via computer network 19. “Database” is used broadly herein so that
the actual databases may comprise a combination of discrete databases, sub-databases, or alternatively
a single, unified database, depending upon the specific needs and efficiencies of a particular
embodiment.
Foundation for Proactive Parts Inventory Planning
Cost savings and manufacturing process downtime reduction can both be achieved through proactive
spare parts management based upon part demand forecasting, rather than reactive management based
upon immediate need and fixed stock levels.
The first step is gaining an accurate picture of what parts are presently kept in inventory and used in the
enterprise's manufacturing processes. Typical manufacturing processes may require thousands of parts
to operate, and those parts requirements can change based upon changes in the processes, such as
upgrades or changes in workflow, as well changes in the type or number of particular products are
manufactured using the processes. A large manufacturing enterprise will typically have many processes
in operation at any given time. Additionally, that same enterprise may be planning to bring still further
manufacturing processes into operation in the future. Accordingly, the enterprise will have a wide
variety of parts required for normal operation.
Despite differences, many of the manufacturing processes may in fact utilize the same parts under
different names. For example, several otherwise-distinct manufacturing processes could all utilize a
conveyor apparatus to move product through various stages of completion. During manufacture, items
such as diapers and tissue paper may both require cutting and folding (or other manipulation) and may
share certain components such as blades or actuators. Otherwise-disparate processes may have
common maintenance needs, such as requiring a certain number of specialized electrical or plumbing
toolkits to be on hand to allow for repairs in case of a breakdown. A simplified instance of
commonality of parts is indicated in FIG. 1. Process A utilizes part 20 and process B utilizes part 20′.
Process C is different from A and B, but utilizes both 20 and 20′.
All of these distinct parts utilized in support of differing manufacturing processes may have initially
been specified under distinct part numbers, however. Such a specification leads to an inflated level of
indicated parts demand since each process will need its own stable of parts. The inflation can be
revealed by assigning common part identifiers to common part types. The system as disclosed herein
identifies the parts independently of the process in which they are used, and uses common identifiers
for common part types. The part identifiers can be part numbers or other alphanumeric designations.
The parts can be identified by utilizing a generated designation assigned to each part, and this can
include cross-linking disparate numbers, such as machine part numbers, enterprise-assigned numbers,
and manufacturer part numbers, in a computer database. The physical parts themselves can be
identified by alphanumeric tags, bar codes, or an RFID chip or chips associated with the part or
containers in which the part is stored.
Once components, such as the parts 20 and 20′ illustrated in FIG. 1 are identified by common
designators for like components, the inventory level of each component is determined. This can be
achieved by scanning a barcode or RFID tag associated with each part that is stored in the inventory
stores of the facilities. Parts can be similarly scanned as they enter or leave the facilities, or are moved
from inventory stores to actual use in processes. Other data entry means may be utilized as well. The
identification of parts and determination of current inventory level and distribution is represented
generally at step 100 of FIG. 2.
For instance, in FIG. 1, facility 16 has implemented a barcode-based system. The inventory database is
updated as parts are scanned in or out of the parts store by worker 22 at facility 16 to show the parts
stocking level. Facility 12 has implemented an RFID-based system, and worker 24 need only move
within range of his handheld RFID scanner to register a part in the database. Facility 14 uses a large-
scale RFID scanner 26 to automatically scan the entirety of parts moving in or out of its inventory store
(via truck 27 in FIG. 1).
Part information can therefore be maintained to as high a level of detail as desired, both for part types
and particular instances of parts. In one embodiment, for each part, the database can include
information on acquisition date, manufacturer, country of origin, model number, manufacturer part
number, manufacturer serial number, part location data, plant section and room, status, manufacturing
asset number and sub-number, operation lead time offsets, cataloguing information, desired stocking
levels and location such as at-plant or in a central store, normal issue quantity, expected plant annual
usage, plant current safety stock, central stores current safety stock, and plant delivery time.
Parts Demand Forecasting
Presently, manufacturing facilities can use specialized software such as SAP® which includes plant
maintenance modules allowing for planning of maintenance cycles based upon part performance data,
such as mean time between failure, maintenance interval calculations, and the like. This software can
also be used to track parts maintenance requests, and such data can be used to separate the breakdown
demand level for parts from the non-breakdown demand level. The non-breakdown demand level
represents the need for parts that are planned to be taken out of service, such as in accordance with
planned maintenance cycles. The breakdown demand level reflects parts that must be kept on hand
(safety stock) in order to keep a manufacturing process operational upon the otherwise-unplanned
failure of a part.
Once a group of facilities have begun actively managing their individual spare parts demand levels, the
data for each of the individual facilities can be cross-referenced and combined to develop a cross-plant
unified demand plan for the entire enterprise. As shown in FIG. 1, calculations based upon the usage of
processes A and C will result in certain demand levels for component 20, while B and C will have
demand levels for component 20′. Using specialized software tools, this information can be extracted
from data maintained for each facility and combined to determine the total level of breakdown demand
and non-breakdown demand for each of parts 20 and 20′ across the entire spectrum of facilities.
This enterprise-wide demand calculation can be used to adjust the number of spare parts kept in
inventory at parts hubs and individual facilities, based upon such factors as maintenance needs,
production and part lead times, changes to existing processes, addition of new processes, changes to
parts by original equipment manufacturers (OEMs), and a determination of optimal spare parts capital
investment. The demand calculation is represented generally at 110 in FIG. 2, and is shown at 115 as
taking into account various considerations such as those listed at 115 for exemplary purposes. The
demand calculation can proceed as discussed in further detail below, and may also consider other
factors deemed relevant to spare parts demand planning by one skilled in the art.
Non-Breakdown Demand
The system can provide for non-breakdown demand for parts by taking into account parts lead times
and ensuring that adequate parts are on-hand when the parts replacement is planned. Using this data,
facilities can be transitioned to purchasing parts for planned and predicted maintenance based upon a
combination of planned maintenance cycles, part performance data, and parts lead times; in one
embodiment, such parts can be eliminated from the central stores in favor of ordering parts for delivery
in accordance with planned needs. The predicted maintenance determination can be based upon values
such as mean time between failure (MTBF), both as provided by the part supplier and as derived from
actual experience using the part, and other concerns such as the environment in which the part is used.
Statistical Analysis of Breakdown Demand
For non-breakdown demand, statistical analysis can be performed to determine the best level of safety
stock inventory to maintain in central stores. For example, analysis of breakdown demand may indicate
that a manufacturer has enough parts on hand across facilities to keep the facilities operational in the
event of a part failure. Rather than tying up capital in purchasing more of those same parts based upon
a fixed purchasing target, the money can be invested in a non-depreciating asset until truly needed to
purchase more breakdown parts, or re-allocated to stock parts that are needed for safety stocks, or to
purchase parts to satisfy non-breakdown demand. The statistical analysis can utilize historical parts
demand levels maintained in the enterprise's computer database(s).
The parts management system can be configured to evaluate parts demand and provide for reordering
parts once the stock level has reached a theoretical reordering point. By providing for parts reorder at
such a point, the system ensures that sufficient spare parts inventory is on-hand to meet projected
breakdown demand. For a given part, the theoretical reordering point is defined as the expected
demand during lead time for the part plus the theoretical safety stock. The expected demand during lead
time can be determined by the average usage of the part multiplied by the lead time for the part. The
theoretical safety stock represents the amount of inventory that must be kept on hand to meet above-
average demand for the part. In one embodiment, the “lead times” used in calculating projected parts
demand are actually part delivery time values based upon lead times provided by OEMs and a
statistical analysis of actual delivery times in practice.
The theoretical safety stock is calculated using statistical theory, and is a function of the lead time for
the part, the daily variance in demand for the part and the required availability for the part, typically
represented as a required availability percentage (for example, the part must be available 95% of the
time). Higher availability requirements require a higher level of safety stock to be maintained. The
average demand, daily variance, and standard deviation of demand rate can all be calculated from
historical demand data maintained in the parts and manufacturing database(s).
The spare parts inventory management system can also consider economic factors in determining spare
parts ordering quantities. For instance, the cost of maintaining a parts inventory is more than simply the
cost of the buying the parts. Rather, the total cost includes the actual cost of the parts, the cost of
ordering the parts, and the cost of holding the parts. From these values, an economic order quantity can
be calculated based upon such factors as the annual price of parts, annual ordering costs, and annual
holding costs. The demand for parts can be correlated with the economies of obtaining the parts to
determine an optimal ordering amount that is based upon both the needs of the manufacturing
processes and the financial realities of the enterprise. Certain parts stocking decisions may require the
intervention of an analyst or other personnel. In one embodiment, the spare parts inventory
management system is configured to automate some parts stocking decisions and leave others for
decision by plant personnel based upon parts pricing considerations and amount of use.
Proactive Spare Parts Inventory Management
In addition to integration with manufacturing management computer systems such as SAP®, the spare
parts management system can be integrated with an existing engineering design system or systems to
enable proactive parts management. When engineering changes are made, such as adding a new
process or redesigning an existing process, the parts requirements due to the changes can be taken into
account in the spare parts management system demand plan calculations, as generally illustrated in
FIG. 3.
For example, assume that the engineering staff at facility 16 implements a change to process C so that
it utilizes two units of part 20′ rather than one as shown in FIG. 1. The engineering design change
triggers a notification (indicated at 200 of FIG. 3) to the parts management system, which then assesses
the changes in the engineering parts database. In an alternative embodiment, the spare parts
management system periodically queries the engineering system to check for changes in parts lists and
requirements. In any event, the increase in the number of part 20′ is ultimately factored in to adjust the
calculated demand for spares of part 20′, both for breakdown and non-breakdown demand purposes.
An engineering change to an existing process may delete the use of a part from an existing process as
illustrated at 215 of FIG. 3. Deletion may be due to a change in the product manufactured using the
process, changes to parts by respective OEMs, or other concerns. For instance, assume that due to a
product redesign, both processes B and C are altered in a manner that eliminates the use of part 20′.
This change will be implemented in the engineering project database. The change to the processes will
trigger a notification to the parts management system, which will evaluate the bills of material and
ascertain that part 20′ will no longer be required in the future. As indicated at 215, 225, and 235 of FIG.
3, the system considers the effective date of the change, the planned demand for part 20′ calculated up
to that point, and existing inventory stocks, to adjust the enterprise-wide demand plan to run-out the
existing inventory of part 20′ so that no, or minimal, excess of the part remains in the spare parts
inventory. Depending upon when the part will go out of service, the adjustment to the demand plan
may include reducing or canceling orders of spare part 20′; for instance, a change planned far in
advance for a part not kept in stock at high levels will result in a more minor change to the demand
plan than a change to be implemented sooner for a part that is highly stocked.
Engineering changes can also comprise the addition of entirely new processes as illustrated generally
by 216, 220, and 230 of FIG. 3. The parts maintenance planning system can accordingly determine
initial stocking requirements and take action to procure needed components. As in the case of parts
addition or deletion, the parts maintenance planning system evaluates the bill of material obtained from
the engineering data for the new process. Based upon existing parts inventory, the new parts required,
the effective date that the new process will come on-line, and the forecast demand for parts new and
old, the demand plan can be modified so that adequate stocks are available to bring the new process on
line.
Adjusting Spare Parts in Inventory
Once a demand forecast has been obtained, at step 120 as illustrated in FIG. 2, part ordering criteria
such as required parts availability, lead times, and economic considerations as discussed above are
considered according to rules specified by parts management personnel. At step 130, the parts
management method proceeds to check the planned part order for criteria which may indicate the
particular part may require further analysis. If so, the part is flagged for follow-up as illustrated at 135
for intervention by a skilled person before ordering is to proceed. One skilled in the art will note that
intervention by parts management personnel may occur at any stage in the parts management process
depending upon the particular needs of the manufacturing enterprise and the criteria specified for the
parts management system. Assuming no exceptions, the final step as illustrated at 140 is for parts
orders or other instructions to be generated. For instance, parts can be ordered from OEMs or
transferred between facilities.
Logistical Considerations
For all parts stocking decisions, lead times for the parts can also be considered, both in considering
forecast demand as well as ensuring that the parts are delivered as soon as they are needed. For
example, consider the case of a new process coming on-line ninety days from the date changes are
implemented in the engineering system. Further assume it requires two components—one with a seven-
day lead time, and a second with a thirty-day lead time. After calculating demand for the parts, the
inventory management system can generate the required purchase authorization forms and place orders
for the parts—ordering the first (seven-day lead time) part for delivery eighty-three days after the
triggering change and ordering the second (thirty-day lead time part) for delivery sixty days after the
change.
Plant demand forecasts also incorporate a determination of the optimal geographical distribution of
spare parts that are on-hand, as well as ordering and delivery strategies. Certain parts may be stored in a
central hub or hubs, while others are earmarked for distribution to facilities for storage. For instance,
parts that are produced near facility 14 and not subject to high system-wide demand can be delivered
for storage at facility 14, and then allocated for transfer of some units to the central store 10 and/or
other facilities rather than direct shipment from the parts manufacturer to facility 10. This can save on
shipping time and cost. Parts that are found to be in demand system-wide may be stored at a hub for
later deployment to facilities. The parts management system can take into account such factors as
manufacturer lead times for parts delivery and facility lead times for parts demand in determining
optimal parts positioning.
Any parts tracking currently using bar codes may instead use smart tags or UWB identification devices.
As will be apparent to one skilled in the art, “Smart tags,” “UWB identification devices,” and “RFID
tags” are all used interchangeably herein to refer to remotely-accessible data storage devices physically
associated with a component. For example, instead of using a bar code to identify a part or parts kit
shipped to a production facility in a parts management system, a smart tag embedded in the part or its
packaging could be automatically read when it is received at the production or storage facility. The
electronic code generated could either uniquely identify the part, allowing links to online part
attributes, or the smart tag could be programmed to contain the needed information, such as part
installation and repair history, warranty and repair instructions, and the like.
Use of RFID tag technology can provide for real-time indications of part inventory and location. In this
manner, although parts are physically located in differing locations, the use of database tracking in
combination with the distribution network essentially provides for an enterprise-wide central storage
facility. As indicated at 26, parts shipments could be scanned as they arrive at the facility on a delivery
vehicle and logged into the parts database without need for facility personnel to sort and identify the
parts. Alternatively, RFID scanning by inventory personnel such as indicated by worker 24 at facility
12 could be employed.
The RFID tag, or other identifying information, can be tied to individual instances of parts to track part
usage, maintenance, warranty information, or other part-specific data. Usage data for individual parts
and aggregates of the same type of part can be used to determine real-world failure data such as mean
time between failures. The calculated value can be compared to information provided by the
manufacturer and can be used to fine-tune demand forecasts for particular facilities and the
manufacturing concern as a whole.
In addition, process bills of materials may be automatically checked by verifying that proper parts have
been installed, based on RFID scanners reading smart tags of the parts or parts assemblies placed in the
process machinery. Parts inventory management may also be simplified by using UWB transmitters or
smart tags to track the physical location of parts within the central store, manufacturing location, or
other facility. With UWB devices, triangulation of an emitted signal may permit location of its source,
much as in GPS systems. With RFID technology, scanners and detectors may read and record the
location of numerous parts in a storage facility, either by passing a scanner through the facility or by
having multiple scanners in the facility that detect objects within a short distance of the scanner. The
part's location can be noted in the data maintained for the part. Based upon the part's location, the
inventory level can be adjusted on an ongoing basis, whether the part is utilized in a process, in storage,
in transit, or for other purposes.
In addition, smart chips or UWB devices worn or carried by the inventory and maintenance personnel
may be used in lieu of a paper checklist to record the completion of general housekeeping duties,
machine health checks, inventory checks, or other actions required by Good Manufacturing Practices.
In another embodiment, smart chips or UWB devices worn or carried by operators may be used to track
and record actions of specific operators. For example, a smart tag identifying an operator may be read
by the various input and control devices associated with an EWMA system or other HMI (human-
machine interface) systems (e.g., a distributed control system) to verify the identity of the operator. If
the operator enters a restricted area or physically modifies a portion a machine or moves a piece of
spare parts inventory, RFID readers in certain locations of interest may track the physical presence or
movement of the operator in proximity to the part and may associate that operator with changes made
to the machine or inventory during that time and in that location, for possible subsequent
troubleshooting or problem solving analysis.
By way of example, RFID tag and RFID readers, under the name Intellitag 500, may be purchased
from Intermec Technologies Corporation of Everett, Wash., and Intermec's Amtech Systems Division in
Albuquerque, N. Mex., or the RFID reader may be a Commander 320 13.56 MHz RFID reader,
manufactured by Texas Instruments of Dallas, Tex. Other automatic identification and object tracking
systems may be used such as RF SAW (radio frequency surface acoustic wave) technology from RF
SAW, Inc. (Dallas, Tex.).
Additional Considerations in Parts Inventory Planning
A warranty management module can be integrated into the spare parts inventory management system to
further streamline the repair process and optimize asset utilization. The warranty module can track
warranty coverage and claims made based upon the histories of individual parts. For example, a
database can contain the length or other measure of warranty coverage, what types of repairs are
covered, where to ship a part for repair, and other information needed to effectuate the repair process.
Certain part repairs may not be covered based upon the cause or type of failure, and the warranty
module can evaluate such considerations based on stored data for the part or prompt users for more
information.
When a part is removed for maintenance or due to part failure, information maintained within the
database can be accessed to determine what warranty coverage, if any, is available for the part. For
example, warranty coverage could depend upon the length of time from purchase for certain parts, or
may depend upon the length or amount of use for others. A part may be covered for only a certain
number of hours, and the warranty module can evaluate whether coverage is available based on the
history of the part. If warranty coverage is available, the parts management system can then generate
the requisite shipping and warranty claim documents and instructions. The part can then be shipped to
the OEM or other repair service provider in accordance with warranty procedures.
In one embodiment, the spare parts inventory management system is extended by additional software
enabling integration and interfacing with parts suppliers. Rather than issuing spare parts purchase
orders alone, the spare parts management system provides the demand plan or portions thereof to parts
OEMs. OEMs can then provide for adequate manufacturing capacity or pricing breaks based upon the
demand forecast.
General Considerations
It will be apparent to one skilled in the art of parts inventory management that the methods and systems
disclosed herein can be implemented utilizing computer software. Such software includes object-
oriented and other programming languages, as well as cross-application programming frameworks such
as the .NET® framework of the Microsoft Corporation. One or more structured or unstructured
databases can be accessed to store, retrieve, and change information according to rules and calculations
in accordance with the methodologies disclosed herein. The parts inventory management system
disclosed herein can be implemented on a single computer or across several computer systems, and
may make use of or change data stored in and by other unrelated computer systems depending upon the
optimal configuration for a particular enterprise. The parts inventory management system may be
implemented in and practiced using a combination of discrete sub-modules or as a unified piece of
software. Furthermore, the data utilized in operating the spare parts management system can be
transmitted via private network, the public internet, or a combination of networks.
Various data input and output schemes and devices can be used in combinations that best suit the
manufacturing facilities supported by the system described herein. For instance, a web-based front-end
to the database is used in one embodiment to allow users to access and modify parts and availability
data and requirements. The database can be accessed via any computing device appropriately linked to
a network with access to the parts inventory management system. These devices can include personal
computers, terminals and servers, and portable computing devices such as PDAs. Parts information can
be entered manually, via RFID scans of a tag or tags associated with parts, via barcode scans, or by any
other conversion of parts identification data into machine-readable format to associate a particular part
with data stored in the computer system.
Decisions on stocking requirements, purchase authorizations, and lead times can be based upon rules
entered into the computer system, and be completely or partially automated and present options or
authorizations via a computer interface for management approval/alteration. In one embodiment, parts
are divided into categories based upon usage, cost, and potential savings and the degree of management
by the system disclosed herein is varied accordingly. For instance, reordering extremely low-cost or
standardized items such as bolts or washers may be managed by individual facilities since the savings
potential from using demand management as disclosed herein is minimal. For other parts, management
intervention may be prompted by the forecast demand meeting certain predefined criteria such as
illustrated at 130 and 135 of FIG. 2 and discussed above. For example, if a part demand forecast is
exceedingly high, exceedingly low, or does not fit expected models, the purchase or stocking decision
can be brought to the attention of parts analysts or managers.

Claims (25)
Hide Dependent

1. A method for managing enterprise-wide component inventory, comprising the steps of:
a. identifying a plurality of components, each comprising a part or tool used in support of at least one
manufacturing process;
b. maintaining at least one inventory store of the components;
c. calculating an enterprise-wide demand plan for each of the components; and
d. adjusting the number of each component maintained in the inventory store based upon the demand
plan.
2. The method of claim 1, wherein the step of calculating a demand plan includes responding to a
trigger initiated by a change in a component bill of material for a manufacturing process.
3. The method of claim 2, wherein the change comprises deletion of a component from a process, and
wherein calculating an enterprise-wide demand plan comprises providing for the inventory store of the
deleted component to run out.
4. The method of claim 2, wherein the change comprises addition of a previously-unused component to
a process as of an effective date of service, and wherein calculating an enterprise-wide demand plan
comprises providing for an initial stocking level of the previously-unused component so that at least
one spare of the previously-unused component is available to meet demand as of the effective date of
service of the previously-unused component.
5. The method of claim 1, wherein maintaining at least one inventory store includes storing a plurality
of components at a central location, and wherein calculating an enterprise-wide demand plan includes
determining a safety stock level for the components based upon statistical analysis of prior demand,
including lead times for the components.
6. The method of claim 1, further comprising: tracking a history of a component, and wherein
calculating an enterprise-wide demand plan for the component comprises utilizing the tracked history.
7. The method of claim 6, wherein calculating an enterprise-wide demand plan for the component
includes utilizing data comprising a frequency of failure of the component.
8. The method of claim 6, wherein tracking a history of a component includes maintaining a record of
at least one individual instance of the component.
9. The method of claim 8, wherein maintaining a record includes maintaining a history of repairs to the
individual instance of the component.
10. The method of claim 8, wherein maintaining a record comprises identifying a physical location of
the individual instance of the component.
11. The method of claim 8, wherein tracking a history of a component includes scanning at least one
RFID device associated with the individual instance of the component.
12. The method of claim 5, wherein the central store has a turns ratio greater than 1.
13. The method of claim 12, wherein the central store has a turns ratio greater than 2.5.
14. A method for managing enterprise-wide component inventory, comprising the steps of:
a. identifying demand values for spare parts used in support of a plurality of manufacturing processes
located at multiple facilities;
b. maintaining at least one inventory store of the spare parts;
c. separating breakdown demand for each spare part from non-breakdown demand for each spare part;
d. determining an average demand level for each spare part;
e. calculating a theoretical safety stock level for each spare part based upon an analysis of the statistical
distribution of breakdown demand values for the part, the planned delivery time for the part, and an
availability requirement for the part;
f. calculating a forecast demand for each spare part based upon the average demand level, planned
delivery times, and theoretical safety stock level;
g. placing orders for each spare part such that the inventory store contains sufficient numbers of each
spare part to meet the calculated forecast demand; and
h. placing orders for each spare part such that sufficient parts are delivered to facilities in accordance
with planned delivery times to meet non-breakdown demand.
15. The method of claim 14, wherein the at least one inventory store is a central hub serving multiple
manufacturing facilities, and
wherein the parts orders are placed such that the central hub contains sufficient numbers of each spare
part to meet calculated demand for all the facilities associated with the hub.
16. The method of claim 14,
further comprising adjusting the demand values for spare parts in response to a change in process parts
requirements discontinuing use of a part, and
wherein calculating a forecast demand comprises adjusting the forecast demand so as to run out
inventory of the discontinued part.
17. The method of claim 14,
further comprising adjusting the demand values in response to a change in process parts requirements
adding a new part, and wherein calculating a forecast demand comprises adjusting the forecast demand
so as to provide for an initial stocking level of the new part.
18. The method of claim 14, wherein identifying demand values comprises using data associated with
an enterprise resource planning computer system.
19. A method for managing enterprise-wide component inventory, comprising the steps of:
a. monitoring at least one identification device associated with a component, the component comprising
a spare part or tool used in support of a manufacturing process;
b. determining a physical location of the component in response to the monitoring; and
c. adjusting inventory data for the component based upon the location of the component.
20. The method of claim 19, wherein monitoring includes scanning an RFID tag associated with a
component that is in use in a manufacturing process.
21. The method of claim 19, wherein monitoring includes scanning RFID tags associated with a
plurality of stored components.
22. A method for managing enterprise-wide component inventory, comprising the steps of:
a. identifying a plurality of components, each comprising a part or tool used in support of at least one
manufacturing process;
b. maintaining warranty data for each component;
c. evaluating the status of each based on component data, including the history of the component and
the warranty data; and
d. providing for repair of a component in accordance with the warranty data for the component.
23. The method of claim 22, wherein identifying includes monitoring at least one identification device
associated with the component.
24. The method of claim 23, wherein the identification device comprises a smart tag emitting a radio
frequency signal, and identifying comprises receiving, from a scanning device, the emitted radio
frequency signal.
25. The method of claim 22, wherein providing for repair includes generating repair request documents
and shipping documents for sending the component to a repair service provider when warranty
coverage is available.

Easy Quantification of Improved Spare Parts

Inventory Policies
Ulrich W. Thonemann
,
Alex O. Brown
,
Warren H. Hausman

Published Online:1 Sep 2002https://doi.org/10.1287/mnsc.48.9.1213.173

Abstract
This paper presents approximate analytical models to quantify the expected improvement in
inventory investment when using a system approach to control inventory as opposed to a
simpler item approach. A system approach ensures that a demand-weighted average fill rate
is achieved at low inventory investment by assigning low fill rates to parts with high costs and
high fill rates to parts with low costs. An item approach does not vary fill rates by parts but
assigns identical fill rates to all parts. Using single-parameter functional representations of
the skewness of unit costs and average demand across all parts in the system, simple
approximate analytical expressions for the required inventory investment are derived for both
approaches. The accuracy of the approximations is validated using data from a distribution
center for computer spare parts. For these data, the solutions obtained by the approximations
are very close to the exact values. The results show that inventory investments can be well
approximated as a function of only a few cost and demand parameters. These expressions
can be used to determine the percentage reduction in inventory investment for a particular
target demand-weighted average fill rate when the superior system approach is used instead
of the item approach. For increased ease of use, the percentage reduction in inventory when
using a system as opposed to an item approach is computed over a range of realistic values
for the key parameters of the model and a quadratic expression is fitted to the data. This
fitted expression provides rough guidelines for the anticipated improvement with very limited
data needed, prior to detailed modeling or implementation.

Computer‐based Inventory Management System for Spare

Parts
Author(s):
Nagen N. Nagarur (Assistant Professor, Asian Institute of Technology,
Division of Industrial Engineering and Management, Bangkok, Thailand.)

...Show all authors

Abstract: Describes the design and analysis of a computer‐based information

system for inventory management in a computer service company. Studies the existing manual
system for possible adaptation and necessary modifications and identifies the requirements of the
users and the components of the system. To facilitate control, the parts are classified into four
categories. Various quantitative models for demand forecast, economic order quantity, and safety
stock are considered, and for each part type, an appropriate set of models is used depending on
the relative importance of its category. The information system so designed is implemented in a
modular form. The database for this application is implemented in dBASE III PLUS while the
control programs are written in CLIPPER tools. Extensive user interface is provided for user‐
friendliness.

System-oriented inventory models for spare parts

Stocks of spare parts, located at appropriate locations, can prevent long downtimes of technical systems
that are used in the primary processes of their users. Since such downtimes are typically very
expensive, generally system-oriented service measures are used in spare parts inventory control.
Examples of such measures are system availability and the expected number of backorders over all
spare parts. This is one of the key characteristics that distinguishes such inventory control from other
fields of inventory control. In this paper, we survey models for spare parts inventory control under
system-oriented service constraints. We link those models to two archetypical types of spare parts
networks: networks of users who maintain their own systems, for instance in the military world, and
networks of original equipment manufacturers who service the installed base of products that they have
sold. We describe the characteristics of these networks and refer back to them throughout the survey.
Our aim is to bring structure into the large body of related literature and to refer to the most important
papers. We discuss both the single location and multi-echelon models. We further focus on the use of
lateral and emergency shipments, and we refer to other extensions and the coupling of spare parts
inventory control models to related problems, such as repair shop capacity planning. We conclude with
a short discussion of application of these models in practice. © 2014 Elsevier Ltd.

Research on the spare parts inventory

The equipment management, maintenance and repair included, has been proven as an important task in
operation. Spare parts inventory can exert great influence on the operation. Spare parts storage is
directly linked to system performance since insufficient stocks can lead to extended equipment
downtime. However, excessive or insufficient stocks lead to large inventory carrying cost and risks of
not having then when they are needed. Therefore, in the management of spare parts inventories, one has
to seek a balance and make a compromise between the cost of stocking the parts and the cost and risks
of not having them when they are needed. In the thesis, characteristics of spare parts are listed by
comparing with WIP and final products. Classifications of spare parts are introduced for different
inventory methodologies. At the end of the thesis, a model for single depot is introduced for
optimization.

A decision-making framework for managing maintenance

spare parts
Despite the huge body of academic literature on inventory management of maintenance spare parts,
few companies seem to deliberately use the proper approaches and tools for a factual and quantitative
assessment. Detaining or not stocks of a spare item, deciding upon the right level of inventory,
forecasting its sporadic consumption are just some of the evidences of the complexity and criticality
underlying the daily decisions the management of a company has to undertake. The objective of the
paper is to provide a stepwise decision-making path in order to orienteer an industrial manager on how
to pragmatically handle the management of maintenance spare parts in a company. The framework is
structured into five sequential steps: part coding, part classification, part demand forecasting, stock
management policy and policy test and validation. Its applicability is demonstrated by making use of a
real business case where it has been successfully adopted.

Inventory management in a multi-echelon spare parts supply

chain
In many industrial sectors, firms are dealing with a demand which is more and more uncertain often
due to the supply chain structure. One of the most critical effects of demand uncertainty is the
simultaneous increase of inventories and decrease of customer service. This work describes an
integrated system for managing inventories in a multi-echelon spare parts supply chain, in which
customers of different size lay at the same level of the supply chain. The differences in size generate
demand peaks and thus a very variable and lumpy demand pattern. The analysis presented in the paper
stems from a case study in the field of durable goods spare parts. The paper contributes in three ways:
on the one hand, it shows that consistency between managerial solutions and supply chain structure
enables to enhance operative performances. On the other hand, it provides a new solution to a problem
that characterises several different industrial contexts. Eventually, it highlights that the exploitation of a
larger and more reliable set of information dramatically improves performance. © 2002 Elsevier
Science B.V. All rights reserved.